Secrétaire général

Launch of the National Urban Policy Review of Korea

Remarks by Angel Gurría, OECD Secretary-General

25 April 2012 - 28 April 2012
Seoul, Korea

Dear Minister Kwon, Dear Ambassador Hur, Dear Mr. Park, Ladies and Gentlemen:
It is a great pleasure to be back in Seoul to launch the OECD Urban Policy Review of Korea. This country is an illustration of how urbanisation and economic development can together contribute to national prosperity.

Korea’s urbanisation process has been amazing. The share of the Korean population living in urban areas increased from around 30% in 1960 to 90% today; one of the highest rates of urbanisation in history. Throughout that process, the country also experienced one of the fastest economic expansions: Korea’s real GDP increased almost 16 times between 1970 and 2009.

This dynamism and the application of responsible macroeconomic policies made the Korean economy remarkably resilient to international shocks. While many countries are still struggling to overcome the greatest crisis of our lifetimes, Korea experienced one of the fastest recoveries in the OECD area. Growth has averaged 5% during the past three years, and for 2012 and 2013, the Korean economy is expected to expand by 3.5% and 4%, respectively.

In spite of this remarkable economic performance, Korea needs to address a set of important structural challenges. Korea has played a leading role in setting green growth policies as drivers of sustained strong economic and environmental performance. This includes major flagship infrastructure development initiatives, such as the Four Major Rivers Restoration project.

Let me highlight four which are key for this country’s economic future:
• First, Korea’s labour productivity is still low, lagging well behind the OECD average.
• Second, population is ageing at an unprecedented rate: by 2050, Korea will be a “super-aged society” with an old-age dependency rate of 70%, the second highest rate in the OECD area!
• Third, the Korean economic model has been very energy-intensive: greenhouse-gas (GHG) emissions almost doubled between 1990 and 2005, and are currently rising at the highest rate among OECD countries.
• Last, but certainly not least, income inequality has been trending upwards since the 1997 Asian crisis, and relative poverty has risen to be the seventh highest in the OECD area.

All these challenges call for Korea to go more structural. Yesterday I presented the Economic Survey of Korea with Minister Bahk and highlighted how structural policies could help address these challenges and sustain long-term economic growth, promote social cohesion and support Korea’s “low carbon, green growth” vision.

Urban policy should be part of the solution

Urban policy should be an integral part of a comprehensive structural reform package. Cities are bearing the brunt of many of the challenges that Korea is facing. Population ageing puts strong pressure on local social services. Cities also have to adapt the existing infrastructure, such as transport and housing, to meet the needs of the growing elderly population. This creates particular challenges for cities in less dynamic economic areas that are already facing tight public resources and losing population. It also requires changes in national land-use and transport policies.

Air pollution is also a problem that cities have to face. And the situation is getting worse, especially in Seoul City, where transport congestion due to increased use of cars generates air pollutants 18 times higher than the national average. The levels of air pollution are much higher in Seoul than in London, Paris, Tokyo or New York.

A feature of Korea urbanisation is that it has resulted in marked territorial disparities. The dominance of the Capital Region is exceptional: following Athens and Dublin, the share of the Seoul metro-region in national GDP is the highest among the 90 OECD metropolitan areas. The seven largest Korean cities account for about half the country’s population and GDP.

On the other hand, smaller towns, especially in rural areas or in regions with no major urban centre, have experienced population loss and this is worsening territorial disparities. It is therefore essential that the design and implementation of public policies take into account spatial issues and do not exacerbate territorial imbalances further.

Cities can act as knowledge-based hubs and boost innovation-driven productivity. In many OECD countries, regional innovation policies supporting clusters, SMEs and fostering the links between higher education and firms have proved to be very successful in developing new regional poles of growth. This is particularly relevant in Korea where innovation is highly concentrated and more than half of the total patent applications are filed in the seven largest cities. It could also help taking better account of the needs of small and medium-sized companies in higher education and reduce the actual skill mismatch.

Korea needs a national urban strategy

A good growth-oriented policy package should include territorial policy and ensure coherence between structural and territorial policies. This is precisely the objective of urban policies: Korea has a long history of such policies that have contributed to the economic development of the whole country. The OECD Urban Policy Review suggests building on this success by developing a National Urban Strategy.

Our Review presents a series of key recommendations for a successful urban strategy. Let me highlight two that we consider crucial:

First, Korea’s urban policy needs to be tailored to the different needs of its cities.

Starting with Seoul, we think the Capital Area needs a specific, stand-alone urban strategy. There are many examples of policies tailored to the individual strengths of “national urban drivers” across the OECD. This is the case of Helsinki in Finland, the Randstad region in the Netherlands, and more recently Greater Paris in France.

The innovation capacity of large cities with high growth potential outside the Capital Area needs to be improved. Here Korea could be inspired by the Finnish experience of the mid-1990s, which introduced a specific urban policy to spur innovation-driven growth in its eight largest cities outside Helsinki.

The revitalisation of lagging cities also requires multi-facetted strategies. These strategies need to identify key local strengths. They need to integrate urban renewal, infrastructure development and job creation to harness strengths and drive growth. An example is Newcastle, in northeast England, where policymakers identified a shortage of skilled workers as a key obstacle to growth, and developed a strategy to attract and retain more skilled and talented people.

Second, governance has to be strengthened. This means improving coordination at all levels: between central ministries, among levels of government in urban areas, and between municipal authorities operating within a single metropolitan unit. This also means improving evaluation tools to ensure that urban planning actually achieves its intended policy outcomes.

This need for evaluation tools is becoming increasingly important in all OECD countries, because of the necessity to spend more efficiently scarcer public resources.

Ladies and Gentlemen:
To tie all this together, I would like to offer a concrete illustration of how an urban strategy can enhance the effects of structural policies, by focusing on Korea’s National Green Growth Strategy. One of the original features of the Korean Strategy is its strong emphasis on cities with clear targeted objectives and provisions for sub-national governments.

This is very relevant in our view, as cities can -- and must – play a leading role in greening our economies. But to deliver green growth, policy coherence is vital. Initiatives taken at different levels can at times be mutually reinforcing, but, if poorly co-ordinated, can undermine one another.

What is true for green growth also applies more generally to structural reforms. Well coordinated urban policies should help reap the full benefits of structural reforms by reducing strong territorial disparities and making income growth fairer and more sustainable.
Thank you very much.